From PRINT EDITION MicroCap Review Fall 2016 Issue

Tuesday, November 22, 2016

The “do good” investing space offers a myriad of acronyms. A common one is SRI (Socially Responsible Investing) or all encompassing ones such as ESG (Environmental, Social & Governance) or EHS (Environmental Health and Safety).

No matter how it’s defined, the opportunities to profit from an investment while also doing good (referred to as a double- or sometimes triple-bottom line initiatives) are increasing exponentially, namely because investors want product and institutional investors are delivering.

As concerns in the environment grew resulting from climate change and rising CO2 emissions, portfolio managers sold positions in fossil fuel producers. Thus, E&Ps, coal and even nuclear power companies joined the ranks in the ‘cleansing process’ pressured by university and college students calling for their endowments to pull out of these investments.

Today, the focus has changed course, in part because energy prices are recovering, gun sales are booming while tobacco producers eagerly market other popular consumer products.

Now, practically every corporation and even small business has either a CSO (Chief Sustainability Officer) or CRO (Chief Responsibility Officer) to address best practices in everything from the environment, to the health and well being of its employees, and its effects on the communities in which its business operates.

Firstly, businesses are taking responsibility as their customer base is asking them to do, while social media has affectively spread the word about business practices globally. Secondly, investors are seeking out sustainable companies, and encouraging portfolio managers in the SRI space to perform robust due diligence in order to ensure that these businesses are worthy of being in their portfolios.

Where to Start

A simple approach with no- to low-fees is an ETF or index. The Dow Jones Sustainability Indexes have a geographic focus either covering the world, or narrowing the focus to Emerging Markets or even a specific country, like Chile. These long only equity portfolios screen names based on a host of requirements involving corporate practices, operation and actions.

Or, an investor can focus on an issue, such as the S&P 1200 Fossil Fuel Free Carbon Efficient Select Indexes, designed to measure the performance of a subset of companies with relatively low carbon emissions. In the fixed income space there are the Barclays Fix Income Green Bond Fund indices.

For more actively managed accounts that typically carry a fee, there may be greater investment turnover, and the application of hedges or overlays.

For the more hands on investor, private equity and venture capital provide opportunities to invest in businesses whose sole focus is sustainability - recyclers, clean-tech, or disruptive businesses that aim to change the way current manufacturing, industry, and retailers are operating while resolving a problem or concern.

Finally there is a small but growing number of investment advisors who can steer the investor in the right direction.

Editor's Note:

Shelley Goldberg is an investment advisor, consultant and board member to businesses focusing on environmental sustainability with an emphasis on double-bottom line initiatives. Previously she served in the capital markets on both the sell- and buy-side with a sector expertise in global resources and commodities. She has been a macroeconomic strategist, trader, and investment advisor for multi-asset, top-down portfolio managers. She managed her own energy fund, G3 Capital Partners, LLC, and ran the largest fund-of funds devoted to natural resources with Union Bancaire Priveé, a Swiss private bank. She has also served as a trading and investments strategist for Brevan Howard Asset Management LLP, a multi-billion- dollar hedge fund manager, and for Roubini Global Economics. Shelley is a frequent writer, speaker, and panelist at industry conferences, and is regularly featured as an expert commentator on television and online segments.